Mr. Carlos Slim met distinguished UNAM students, teachers and researchers to talk about diverse Mexico’s problems, Mexico’s insertion in the current world, its institutions, UNAM and the world as well.

The talk came about in UNAM campus. Dr. José Narro Robles, UNAM rector, welcomed Mr. Slim.

México City, June 21, 2010.

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Between that new society and the preceding one there was an intermediate step, which I would conceive as a “natural” outcome of vertiginous change. I am talking about dictatorships and totalitarian regimes. They substituted divinity for nationalism or the people, in whose name they did erect tough dictatorships. It was a transition.

XIX Century’s dictators were seen as “natural” because they abode the monolithic power of preceding centuries. Some countries still suffer them, yet dictators rule amid growing opposition and adverse global environment.

Slavery has extinguished itself because it has become useless, not because of Spartacus-like heroic rebellions. Former African colonies evolved as independent countries because colonialism turned to be obsolete, not because African peoples had defeated German, British and French armies.

The Twentieth Century transformation was impressive, yet often it lacked wise leadership, so we have had and still have million human deaths because of war and other calamities.

There were also costly social experiments. Lab experiments are essential for the advancement of scientific knowledge. On contrary, social, political and economic experiments are cruel; they led to war and destroy human life on a large scale.

The transformation of the two past centuries can be viewed as the transit from a primary agrarian society to a secondary one. It lasted about 200 or 250 years. Secondary society means the ability to add value to primary goods, so transforming them into manufacture. Nowadays we are living into a tertiary or service society: digital, information or knowledge society, you name it.

Tertiary society means that most of a given country’s working population is service-employed. We should consider that total working population is about 40 percent of total population. The United States have about 12 percent of its working population in both primary and secondary sectors. The rest is employed in service sector.

Most of the countries have become service societies; its good production has become more efficient because of to technology. Modern machinery and equipment has enlarged productivity by the tens in respect to one hundred years ago. Such is the picture in mines, highways, dams and factories all along the world nowadays. The work done by 100 workers in the past is nowadays done by a single one.

Technology has also transformed the relationship between people and machinery. In the past, workers were adhered to machines, like in Charles Chaplin’s film “Modern Times”. Nowadays, operators control one or more machines through digitalized monitors.

In contrast to the agrarian society, the knowledge society is not aimed to maximize labor and minimize consume, neither profiting from exploiting physical human force. Its aim is to maximize the use of machinery and equipment by qualified labor force. Nowadays machines run 24 hours a day, while working hours and physical effort tend to decrease.

In contrast to agrarian society’s slave or servant labor force, poverty is no longer profitable nowadays. Poor people should be enrolled into the market, not by social justice ideal or ethical command, just because of economic demand. What modern society needs is educated, qualified and healthy people; I mean human capital able to produce income, make decisions and increase its own consumption as part of the market.

I began to realize this during the 1990’s while talking with Alvin Toffler. He clearly explains that any civilizing change means crisis (Jean Jacques Servan-Schriber had explained this in The American Challenge, 1965). Toffler explained me that the transition from the agrarian society to the industrial one in the United States produced the Civil War between industrial North and pro-slavery South. As a result, the United States embraced a new paradigm. Such has been the pattern for many other societies who have suffered wars.

The transition from nomadic groups to sedentary societies seems to be occurred smoothly. In contrast, the current transition towards the knowledge society has exhibited leadership problems. It seems that China has managed itself to hit the target.

I hope the outline above be useful to see Mexico’s current situation and future. During 50 years, from 1933 to 1982, Mexico’s economy grew 6.2 percent on average, in disregard of bad or good governments, high or low inflation, recession or war. At the base of that growth was the transition from rural society to an urban and industrial one; that is the same phenomenon that the advanced countries experienced during the XIX century, and China is experiencing at the present time.

Rural and subsistence China is being surpassed nowadays. It was Maimonides who said: “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” Giving a man a fish is like condemning him to subsistence. Nowadays we could aptly say: Teach a man to commercialize the fishes he catches and he will enter to modernity.

The Chinese have a severe policy; freedom is limited and local in reach; yet they are transiting from rural society to a postindustrial and ultramodern one –a knowledge society– by forming human capital at a large scale, both creating knowledge of its own and sending students abroad. They are accruing about six or seven million professionals, 500,000 or 600,000 engineers each year. They are really focused.

During the last 30 years or so, China has been growing between 7 and 10 percent and getting about 25 or 30 million persons out of poverty each year to enroll them into modernity. China is nowadays the world factory with low labor costs, certainly. Labor force is still exploited, yet a big change is on the make. The current global crisis is impelling China to develop its own domestic market after many years of neglect.

As I was saying, Mexico’s economy steadily grew during 50 years. Certainly, the economy was protected by tariffs and other instruments –less than it is said, by the way. It is also true that many Mexican industries were a receptacle for obsolete equipment and machinery from abroad, yet it consistently grew up, and it has been modernized by competitive standards recently. What is to be done? Again, technology is the key for transformation.

Let me make a digression: Homo habilis’ brain weight was about 600 cubic cm; Homo erectus’ was about 900 and then 1,200. Our modern brain weight is about 2,000 cubic cm. It is supposed that evolution has made its own work. But mutation has also occurred. A mix of evolution and mutation has taken place. And evolution is adaptation frequently. Because of mutation, our brain can expand itself four times in a two-year period. In contrast, gorilla’s brain remains stagnant during 14 years. Here present doctors know more than me, of course. But it is a fact that a newborn infant’s brain weights 230 cubic cm; two years later he is able to think with a brain weighting 1,200 cubic cm, and at 14 years old he is able to perform complex reasoning. A newborn Gorilla’s brain weight is almost equal to ours as newborn infants, yet it slowly grows just to 450 cubic cm at the age of 15.

Mutation is at the core of human advancement and technology. By now, modern technology has advanced much, and we are just at its beginning. Yet we don’t know how to steer the change, and I am including the advanced countries, mainly the United States, because their mental habits and institutions keep deeply rooted in the industrial society. That is why the current crisis has occurred.

I am afraid I have overextended myself… Let me back to Mexico’s economy. After the Stabilizing Development period (1959-1970), the Mexican economy entered into a deteriorating course. In 1976, the external debt grew up to 20 billion dollars from 5 or 7 billion dollars at the end of Ortiz Mena’s Treasury administration. In 1982 the external debt grew up to 80 billion dollars as the fiscal deficit totaled about 14 percent in respect to GDP. The interest rate grew up to 20 percent, so disjointing the economy; compare it to the current 5-7 percent.

As a result of the 1982 financial crisis, Mexico’s foreign creditors were able to introduce a set of policies and rules, some good, whose main aim was to collect the external debt, not only in Mexico, rather in all of the Latin American countries. That was in the eighties, very hard years for all of us. I have brought a little book with me, The Washington Consensus, to abound on this in the answer-question round.

In financial terms, our current situation is fortunate if we consider our economic potentiality. What is needed to unravel it? Such was the question we made in that dinner. Obviously, both physical and legal safety is needed. Although localized in some hot spots, insecurity is one of our biggest problems. We are called to avoid deterioration. Without physical and legal safety there is no freedom. Legal reliance is a basic condition for foresightedness; I mean all of us, not only investors. 

After security the crucial thing, human capital formation, it comes. As we see it, human capital formation starts by nurturing pregnant women and giving perinatal care. A well-nurtured pregnant woman will give birth to a healthy child; a healthy child will be safe of many diseases and his brain will be normal. Nutrition during his first two years is critical. Early education is also very important. Healthy and educated people stand for the best labor offering. We should improve human capabilities beyond loading bulks, pushing wheelbarrows, driving cars.

If you see a building labor, you will not see loading laborers; what you will see are crane, trip and loading operators, qualified abilities. So, human capital is critical. Physical capital is critical too. No country can attain development without infrastructure.

I am just repeating something that Rolando Cordera, here present, is recalling right now, I guess, the Chapultepec Agreement. What we need is investment to attain sustained growth and employment. Some policy changes are needed. We could consider them in the next round. The real thing is investment to create jobs. Politicians love to talk about employment, yet the job posts they use to create usually are inefficient, customary and social-assistance biased. Politician-created jobs are just a public resources-handling matter. The point I want to make is that jobs can only be created by employers.

Small and medium-size firms stand for the biggest employers in all of the countries. We should consider that services count for the main economic activity for all of the cities. Then, we should secure that our services be the best. By instance, we could provide high-quality health service for Americans. The U.S. health-care system costs about 17-18 percent of GDP and counting without having attained universal coverage –it is already bankrupt. If American patients were attended in Mexico, U.S. health-care costs would diminish about 70 percent. In fact, Mexico would be the solution for them.

We should promote health tourism by linking our health services to U.S. Medicare. In fact, such a link already abides for medical emergencies. That is what I call high-quality services. We should extend them to all of the medical conditions. In the same vein, we could link tourism to many other high-quality services.

Micro, small and medium-size firms are called to satisfy a big part of such a huge potential demand. Big firms grow up from smallness. Unfortunately, small firm’s mortality is bigger. We should ameliorate it in the same way we have diminished infant mortality. Redundant and onerous regulation should be eliminated. Government should allow firms to get established without any requirement. Once established, a firm should be required to confirm its owner identity through his own phone, power or water-consume bill, plus other basic data (how many employs he has, their age, etc.)

We have not been deft in riding globalization. Globalization is a fact of life. We have no option. Both big and small countries are opened to it. Small countries are wholly opened; big countries, like China and Brazil, are opening themselves according to its own needs. Since our economy and population has a considerable scale, we could fix certain rules for investors: who would be welcomed, what we expect from them, how he would manage his business, etc.

Today’s news says we are going to abolish tariffs, eager as we are to wholly opening the economy… in 2013. What we need, instead, is fostering productive investment to create profitable jobs.

My speech has overextended itself. Let us to talk if you will.


Remark-question number one: Good afternoon, I am pleased to be in that gathering with you, Mr. Slim. Our theme is very important and UNAM could contribute to enrich it, especially with you, having showed your ample vision about the civilizing process and human development. You have said that science and technology are keys for human development.

We have taken for granted that fostering science and technology is a public commitment. We all fully agree with that and we are expecting a neat definition for increasing public support for us, rather we also expect private support. I fully agree about the importance of human capital to foster development. It is that aspect that highlights the link between education and production to employ the educated young into small and medium-size firms to make them more profitable and socially responsible.

Now, strategic areas matter, growth course, by instance. We think that basic knowledge development, which irradiates to health, energy, telecommunication, water, disaster prevention, environment sustainabilty, food production, etc., stands for a strategic area. All of these problems demand both scientific approach and qualified personnel.

How to educate human resource able to work in the productive sector while generating and applying fresh knowledge?

Between postgraduate and productive sector there is a big gap. We should close it by linking UNAM excellence to growing enterprises.

That is both a remark and a question. ¿How we could near these both entities?

Remark-question two: Good afternoon, thanks to be allowed to be in here. My question approaches the scientific side. Developed countries heavily invest in science. Even Brazil invests more than Mexico. Mexico is laggard in this aspect. While we celebrate our bicentennial deeds, European countries are advancing protein knowledge.

Developed countries conceive science as investment. Mexico has scientific human resources, Mario Molina, Francisco Bolívar, you name them. Many more are in the list, yet many of them fly to other countries. My question is as follows: if you think that human capital is critical for Mexico’s development, ¿how science teaching could fit into?

Question and remark number 3: Good morning. I would like, in the name of my law postgraduate fellows, to thank your honorable presence in your own university.

My remark is about what you have called the new or tertiary society, as some theorists have called it, whose main features are technology and innovation. Knowledge society is also a new model which we are just envisaging without being well adapted to it. My question is as follows: What is the role of telecommunications in respect to economic development in that new society and how law making could contribute to it?

In respect to small and medium-size firms, which create most of jobs, you have suggested to eliminating onerous regulation. Could you elaborate on that point? Thanks.

Carlos Slim Helú: Thanks you, I am going to start by answering the last one question. Small and medium-size are suffering high-rate mortality. What impair them most are burdensome regulation, authority’s corruption and lack of financial capital. All of these factors push them to informality or death. In respect to financing, we are already running a chirographical small-credit program from 15,000 to 100,000 pesos each, having accrued about 25,000 credits. In respect to regulation, I fully favor large deregulation, which I see as inevitable. In measuring country’s competitiveness, the World Economic Forum measures legal requirements and respites for opening a business. When legal requirements are burdensome, firms tend to go to informality. We should allow ordinary firms to freely establish themselves and then notify their opening to authority by simple means.

Small and medium-size firms setting up should be eased by derogating exhausting requisites and giving them credit access. A family small-firm should be exempted of accounting experts and other intricate things.

Now, tertiary society is not a theoretical thing. An economy employing 85 percent of its working population in service sector is not a theory, it is a fact. Because of increasing productivity, goods production tends to demand lesser labor force. Because of machines, equipment and highly-productive technology, Agriculture increasingly demands lesser labor force. U.S. agriculture employs about 2 percent of total U.S. working population. That is a fact.

Then, we already know what the new society it is. What we have to do is taking a stand in the most convenient way to us. Each country has its own peculiarities and rules. The conclusion of the Barcelona Agreement in 2004 is that each country needs its own recipe according to both size and development step.

In respect to the role of telecommunications, they stand for the nervous system of the new civilization. What we need is competition, investment, development and universal-access promoting rules. Since telecommunications are increasingly used in health, education, business and recreation services, regulation should secure universal access to them.

Agrarian society rested upon men and land exploitation. The new society, instead, rests upon wellbeing management; it is a generous civilization being sustained upon human wellbeing. Educated people exert both consume power and service access, so activating a feedback process for economic development. China’s economy has become sustainable because it includes to modernity 10 percent of its population each single year. Other people’s wellbeing is the big thing of that new society.

I have no doubt that in the medium and long term, things will be beneficial. I don’t know the upcoming problems, yet I am sure that culture, entertainment, study and knowledge opportunities will grow.

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